Consequences of French weakness

German Greek exit proposal sows discord

by David Marsh

Wed 22 Jul 2015

A ‘temporary’ Greek exit from economic and monetary union, proposed by Germany, supported by many German-leaning euro members, yet hotly opposed by France and Italy, was narrowly averted in the marathon negotiations that ended on 13 July. But the suggestion may still eventually decide Greece’s fate in monetary union. The divergence between the two countries demonstrates new fragility in Franco-German relations that looks likely to mark European co-operation for years to come.

Wolfgang Schäuble, the German finance minister, whose hard line on Greece ended up determining Chancellor Angela Merkel’s negotiating stance, has made clear in the week since the ill-tempered European summit on Greece that he still favours a Greek exit from the euro.

Whereas it once would have feared European isolation, Germany now puts forward views opposed by France with demonstrative self-confidence. This reflects not only manifest German economic strength but also EMU membership of several smaller nations from central and eastern Europe that take an even more robust attitude than Germany on the Greek economy.

From the Baltic to former Yugoslavia, small euro states that were previously part of the Soviet bloc have been converted to German allies and steadfast proponents of monetary orthodoxy. European changes since German reunification 25 years ago represent a double blow for France. The Germans used to be France’s buffer zone against the Soviet Union. Yet as the new round of EMU antagonism shows, a cluster of small ex-communist countries now play a similar role – but now as buffer states to protect Germany against France.

We shall see reinforced efforts in coming months by French President Francois Hollande and Italian Prime Minister Matteo Renzi to build a European coalition opposing German-style austerity – an alliance that could find support (depending on economic and political developments) in Madrid and Lisbon.

The problem for Hollande is the same one that faces Sigmar Gabriel, the German Social Democrat leader and deputy chancellor in Merkel’s coalition. Full-blooded efforts to resist the Merkel-Schäuble line on Greece, and downgrade efforts at economic discipline or supply-side reforms, are likely to generate strong countervailing pressures.

They would be met, in Hollande’s case, by a widening of Franco-German bond spreads, and, for Gabriel, by a fall in his domestic popularity ratings and a further improvement in Merkel’s. The tough stand on Greece by the chancellor and her finance minister may have provoked indignation in parts of southern Europe, but it has won admiration among many German voters.

Especially if – as is well-nigh inevitable – the Greek bail-out package runs into further summer hurdles, Germany will reap further negative reaction from southern Europe. Hollande’s all-too-obvious weakness in the Brussels negotiations is likely to enhance his own desire for a sharper profile against Germany as he prepares for a bruising presidential election in April-May 2017 against Marine Le Pen of the Front National and, possibly, revenge-seeking former President Nicolas Sarkozy.

Behind the scenes, bitterness has been building for some time between Paris and Berlin. A new generation of German politicians and civil servants has come to the fore, less patient, more self-confident, and less likely to pay homage to the Grande Nation. Despite his tendency to irritate Parisian opinion, Schäuble, 72, born near the French border, and the only important serving European politician to be born during the second world war, is actually one of the most francophone German ministers.

Hollande and Merkel have never tried to hide their lack of empathy. Merkel set a downward spiral in train a few months before the French elections in spring 2012 by despatching a senior official from her Christian Democrat Party to tell a pro-Sarkozy French party rally that Hollande represented ‘outdated concepts and left-wing dreams from the ragbag of politics’.

In the years since unification, even as the basic ties of post-war reconciliation begun to fade, the French and Germans have been bound together by a curious symbiosis. France has needed an outwardly robust Germany to camouflage the extent to which the French have fallen from grace in the economic and political stakes since the 1980s. And for Germany, the appendage of an apparently confident (but in reality seriously weakened) France has been a profoundly useful device to conceal from the rest of the world an inconvenient rise in German power.

Now this subtle calculation appears no longer to be valid – with results that no one can forecast, let alone master.